Tumblr Ponders Ways to Boost Revenue

Nine months after Yahoo acquired Tumblr, it is considering ways to boost revenue from the visual-blogging site, including an ad network, an ad exchange or video ads.

In an interview with The Wall Street Journal, vice president of product Derek Gottfrid said Tumblr has moved deliberately to expand the presence of ads on the site. “I don’t think we’ve moved slowly, we’ve just been thoughtful,” he said.

Executives are balancing the need to recoup Yahoo’s $1.1 billion purchase while not alienating Tumblr’s 35 million U.S. desktop users, according to comScore.

Ad executives say Tumblr appears to have lost momentum among advertisers since the acquisition, partly because its “native” ads – which are designed to look like other blog posts – are now more common on other sites. It’s also fighting a reputation among advertisers as a place where users younger than 30 hang out – and older users don’t. Brands also grumble that Tumblr requires a specialized, and more time-consuming, creative effort.

“Tumblr is big with millennials, and should be a crucial part of the mix for brands wanting to engage them,” said Robin Grant, global managing director for the agency We Are Social. “But it does require significant investment” in developing ads specific to Tumblr.

Gottfrid said ad demand is strong. He said Tumblr set records for ads and revenue on Valentine’s Day, with campaigns for Nickelodeon, GE, Netflix’s House of Cards, NBC’s Tonight Show, and the movie “About Last Night.”

“We do think there is some education for brands,” Gottfrid said. “Everybody’s a creature of habit. We’re asking advertisers to invest in educating themselves.”

Brand advertising is Tumblr’s strength. To reinforce that point, Tumblr now charges advertisers based on how much their ads are shared by users, or how many followers the brand attracts. “We see these actions really as amplifications for brands, where people become an advocate,” he said.

To increase revenue, Gottfrid said Tumblr could launch an ad network to distribute its highly visual and social ads to other sites, beginning with Yahoo and others it owns.

He said Tumblr also could begin an exchange, as Facebook has, for marketers to target specific audiences on Tumblr. “At some point I could see it,” Gottfrid said.

Gottfrid also sees opportunity in video, in part because many prominent YouTube program creators have large Tumblr presences.

“I think one thing we want to do is make video a better experience at Tumblr,” said Gottfrid. “We think it’s an OK experience now. We may opt to do something there.”